Personal Financial Planning 13th Edition by Lawrence Gitman,Michael Joehnk,Randy Billingsley

Exercise 41

Harmony Shadwell wants to buy 300 shares of Google, which is currently selling in the market for $757.49 a share. Rather than liquidate all her savings, she decides to borrow through her broker. Assume that the margin requirement on common stock is 50 percent. If the stock rises to $800 a share by the end of the year, show the dollar profit and percentage return that Harmony would earn if she makes the investment with 50 percent margin. Contrast these figures to what she'd make if she uses no margin.